Is greed OK if it’s tempered with charity?

As we begin the annual season of bank bonuses, some Wall Street institutions seem to be getting the message. Not the message that their bonus structure is out of line, but the message they need to do damage control with the public.

Goldman already set aside $16.7 billion for compensation during the first nine months of the year, and with the firm looking at a $12 billion profit for 2009, the pay packages are going to be among the biggest on the Street. Hence, the charity maneuver.

According to the New York Times:

While the details of the latest charity initiative are still under discussion, the firm’s executives have been looking at expanding their current charitable requirements for months and trying to understand whether such gestures would damp public anger over pay, according to a person familiar with the matter who did not want to be identified because of the delicacy of the pay issue.

This is an old dodge. As the Times notes, Bear Stearns required its highest-paid employees to give 4 percent of their earnings to charity. Just last week, I got an email from a reader who thought my criticism of Citi’s bowl sponsorships was unfair, citing founder Sandy Weill’s philanthropy and the charity programs that Citi supports all over the world.

It really doesn’t matter how Wall Street tries to ice it pay cake. Bonuses remain central to the cause of the last meltdown and will just as certainly fuel the next one. The incentive system creates escalating short-term rewards for assuming ever higher long-term risk.

If people can be rewarded without having to worry about the consequences, what do you think they’re going to do?